Material Well-Being in America since 1979
J. Bradford DeLong
Over at Project Syndicate: Over at Project Syndicate:
How true is this, really? The answer appears to be: true--with perhaps a very few caveats, but important caveats:
Over at Project Syndicate: Over at Project Syndicate:
How true is this, really? The answer appears to be: true--with perhaps a very few caveats, but important caveats:
Every time I try to get out, they pull me back in. This Monday internet space is supposed to be for:
Self-improvement, correcting errors that I have made and raising to the front of consciousness smart alternatives to my views that my previous visualization of the Cosmic All had not given proper weight; and
In the process, maybe giving the spotlight to smart people who are not widely enough read.
But things keep happening.
Today we have Dianne Furchgott-Roth and James Pethokoukis, Dianne Furchgott-Roth, and Michael Strain. They really do have to decide to what degree they are going to try to maintain a toehold in the reality-based community, or simply give themselves over to total 100% hackdom:
...less than 10% in the late 1970s but now exceeds 20%.... A large portion of this increase is due to an upsurge in the labor incomes earned by senior company executives and successful entrepreneurs. But... did wealth inequality rise as well?... The answer is a definitive yes.... We use comprehensive data on capital income—such as dividends, interest, rents, and business profits—that is reported on individual income tax returns since 1913. We then capitalize this income so that it matches the amount of wealth recorded in the Federal Reserve’s Flow of Funds.... In this way we obtain annual estimates of U.S. wealth inequality stretching back a century. Wealth inequality, it turns out, has followed a spectacular U-shape evolution over the past 100 years.... How can we explain the growing disparity in American wealth? The answer is that the combination of higher income inequality alongside a growing disparity in the ability to save for most Americans is fueling the explosion in wealth inequality. For the bottom 90 percent of families, real wage gains (after factoring in inflation) were very limited over the past three decades, but for their counterparts in the top 1 percent real wages grew fast. In addition, the saving rate of middle class and lower class families collapsed over the same period while it remained substantial at the top.... If income inequality stays high and if the saving rate of the bottom 90 percent of families remains low then wealth disparity will keep increasing. Ten or twenty years from now, all the gains in wealth democratization achieved during the New Deal and the post-war decades could be lost.... There are a number of specific policy reforms needed to rebuild middle class wealth.... Prudent financial regulation to rein in predatory lending, incentives to help people save... steps to boost the wages of the bottom 90 percent of workers are needed.... One final reform also needs to be on the policymaking agenda: the collection of better data on wealth... READ MOAR
...is compatible with values rooted in our nation's history, among them the high value Americans have traditionally placed on equality of opportunity.... To the extent that opportunity itself is enhanced by access to economic resources, inequality of outcomes can exacerbate inequality of opportunity, thereby perpetuating a trend of increasing inequality.... Society faces difficult questions of how best to fairly and justly promote equal opportunity. My purpose today is not to provide answers to these contentious questions, but rather to provide a factual basis for further discussion.... I will review trends... then identify and discuss four sources of economic opportunity in America.... The first two are widely recognized as important sources of opportunity: resources available for children and affordable higher education. The second two may come as more of a surprise: business ownership and inheritances.... In focusing on these four building blocks, I do not mean to suggest that they account for all economic opportunity, but I do believe they are all significant sources of opportunity for individuals and their families to improve their economic circumstances...
Let's quote Thomas Piketty:
...in the United States. The increase was largely the result of an unprecedented increase in wage inequality and in particular the emergence of extremely high remunerations at the summit of the wage hierarchy, particularly among top managers of large firms...
...They’re intrigued, but not convinced. Perhaps Mr. Piketty has isolated the forces that will drive wealth inequality in the future, but for now, they’re not convinced the forces he focuses on are central to understanding the recent rise in wealth inequality. At least that’s my reading of the latest survey run by the University of Chicago’s Initiative on Global Markets. I’ve written before about their Economic Experts panel, which is intended to be broadly representative of opinion among elite academic economists.... The expert economists were asked whether
the most powerful force pushing toward greater wealth inequality in the U.S. since the 1970s is the gap between the after-tax return on capital and the economic growth rate.
To translate, does the T-shirt slogan “r>g” explain why wealth has become more unequally distributed?... 18 percent... uncertain. The clear majority either disagreed (59 percent) or strongly disagreed (21 percent)....
But what was the point of this? We saw from the Piketty quote up at the top that Piketty does not think that "r>g" has been driving the rise in American inequality. Why is it an interesting question to ask?
Justin, in my view, buries the lead, for he does indeed point out later on in his article:
If surveyed, it is likely that he would have joined the majority view in disagreeing with the claim the survey asked about. In Mr. Piketty’s telling, rising incomes among the super-rich are responsible for the recent rise in wealth inequality...
Shouldn't the IGM Forum at the Booth Business School of the University of Chicago have found somebody who had actually read Piketty's Capital in the Twenty-First Century to decide on what questions to ask?
I am sure that it was always such--that intellectual standards in the academy were always not that high, and that a great many of the people making arguments always were people who hadn't done their homework. But I do seem to be reminded of it more and more these days, especially since the beginning of the financial crisis back in 2007...
Over at Equitable Growth: Nick Bunker picks up the slack left when Reuters pulled the plug on its noble and very useful Counterparties:
Nick Bunker: Where is the wage growth?: "The lack of wage growth is on everyone’s mind...
...Catherine Rampell at The Washington Post considers a variety of reasons for this slow wage growth... but finds one more convincing... a considerable amount of slack in the labor market.... Justin Wolfers presents a related puzzle... at the historical relationship between the unemployment rate and average wage growth.... Jared Bernstein looks at the relationship between wage growth and... [a] labor market slack [measure] developed by... Andrew Levin... [and] finds that the... relationship between slack and wage growth has weakened.... Tim Duy... thinks that Wolfers’s puzzle... isn’t all that puzzling.... The meager wage growth of recent years is just a continuation of a long-term trend highlighted by The New York Times’ David Leonhardt...
It is very clear to me that the Cato Institute's health-care economists Michael Cannon, Jagadeesh Gokhale "Estimating the Effect of the Patient Protection and Affordable Care Act on Kansas Medicaid Expenditures", Should Kansas Expand Medicaid Under the Affordable Care Act? A Perspective On Weighing the Costs and Benefits, and Angela Erickson (Jagadeesh Gokhale and Angela Erickson The Effect of Federal Health Care ‘Reform’ on Kansas General Fund Medicaid Expenditures) did not believe that turning down the Medicaid expansion was in the interest of the people of Kansas. They sold it to the Kansas legislature that way, but what they thought was that if enough states rejected the Medicaid expansion then congressional Democratic support for ObamaCare would collapse and a better deal could then be negotiated at the federal level. It is very clear to me that Arthur Laffer did not believe that Sam Brownback's tax-cut proposals would immediately jump-start Kansas's economy the way he told the Kansas Republican Party that they would.
There was a con.
The question is: who was in on the con? Was it Cannon, Gokhale, Erickson, Laffer, Crane, and company conning Charles Koch? Was it Cannon, Gokhale, Erickson, Laffer, Crane, Koch, and company conning Sam Brownback? Was it Cannon, Gokhale, Erickson, Laffer, Crane, Koch, Brownback, and company conning the Kansas Republican Party? Or was it Cannon, Gokhale, Erickson, Laffer, Crane, Koch, Brownback, the Kansas Republican Party, and company conning the voters of Kansas? I would dearly like to know the inside story...
Lives lost from Ebola to date are tiny, even in West Africa, compared to HIV, TB, and malaria. Ebola still not (yet) the biggest public health problem in West Africa.
Yes, the epidemic will spread to more countries.
Ebola will not become the biggest public health problem in West Africa unless deaths reach the high seven figures--which they may: it is highly likely that deaths in the six figures are now baked in the cake.
Unless the virus changes dramatically, we are almost surely safe. If you want to worry, worry that influenza or something already airborne will become more deadly, not that Ebola will become airborne.
Those at risk from the Ebola virus are overwhelmingly (a) those who love them and (b) those medical professionals who treat them--you get it from direct fluid contact with symptomatic patients. Thus risks here in the United States are very low. It is scary, but unlikely to be a serious problem here.
Why, then, are risks high in West Africa? The major problem with control is that there is no functioning health system in most of sub-Saharan Africa. Not only are resources poor, but they are uncoordinated. What we really need is a helicopter drop of trained people.
The health system was especially poor in Liberia. You have issues like no supply of gloves to hospitals. Few doctors even to begin. Had the epidemic started in Ethiopia or even Uganda, the probability of it getting out-of-control epidemic would have been much less--Uganda, for example, has excellent hospitals, good supply, competent public health, and even a decent medical school. Just how bad Liberia’s system was should not be underestimated.
Secondary problems in West Africa are that: (1) Ebola can be difficult to diagnose; (2) Ebola is easily transmitted in cultures where people are expected to die at home in non-sterile and non-antiseptic environments; and (3) Ebola is easily transmitted in cultures where people--still infectious--are prepared for burial at home.
The economic cost of Ebola to the countries most affected is and will be immense, in addition to the loss of life.
In general, we are not well-equipped for some types of global pandemics. The advance from years of nothing on AIDS to stopping SARS in its tracks was immense. But it relies on functional organizations--and we did and do not have any such in the affected West African areas.
Nevertheless, it is surprising how unprepared the WHO and international community was for for this kind of emergency. The WHO is a UN organization, and it is a mistake to expect much bureaucratic competence of UN organizations. Nevertheless, the international response should have been swifter and more effective.
The Ebola crisis is eating up resources in West Africa that are desperately needed in other areas of health and society. It's not so much money as people--doctors pulled in from caring for pregnant women to manage Ebola patients, NGOs working on violence reduction in Sierra Leone now counting the dead. Really sad. We are likely to lose most of the health-care professionals in the most severely affected sub-Saharan African countries.
The importance of investing in strong public health infrastructure--which is both massively underfunded and very cost-effective compared with acute care.
Courtesy of Chris Blattman, David Cutler, Ann Marie Marciarille, and others...
Over at Project Syndicate: The extremely sharp but differently-thinking Peter Thiel:
Peter Thiel: Robots Are Our Saviours, Not the Enemy: "Americans today dream less often of feats that computers will help us to accomplish...
...[and] more and more we have nightmares about computers taking away our jobs.... Fear of replacement is not new.... But... unlike fellow humans of different nationalities, computers are not substitutes for American labour. Men and machines are good at different things. People form plans and make decisions.... Computers... excel at efficient data processing but struggle to make basic judgments that would be simple for any human.... [At] PayPal... we were losing upwards of $10m a month to credit card fraud.... We tried to solve the problem by writing software.... But... after an hour or two, the thieves would catch on and change their tactics to fool our algorithms. Human analysts, however, were not easily fooled.... So we rewrote the software... the computer would flag the most suspicious transactions, and human operators would make the final judgment. This kind of man-machine symbiosis enabled PayPal to stay in business.... Computers do not eat.... The alternative to working with computers... is [a world] in which wages decline and prices rise as the whole world competes both to work and to spend. We are our own greatest enemies. Our most important allies are the machines that enable us to do new things...
Paul Krugman: Those Lazy Jobless - NYTimes.com Last week John Boehner, the speaker of the House, explained...
...People, he said, have “this idea” that “I really don’t have to work. I don’t really want to do this. I think I’d rather just sit around.” Holy 47 percent, Batman! It’s hardly the first time a prominent conservative has said something along these lines.... But it’s still amazing — and revealing — to hear this line being repeated now. For the blame-the-victim crowd has gotten everything it wanted: Benefits, especially for the long-term unemployed, have been slashed or eliminated. So now we have rants against the bums on welfare when they aren’t bums — they never were — and there’s no welfare. Why? First things first: I don’t know how many people realize just how successful the campaign against any kind of relief for those who can’t find jobs has been. But it’s a striking picture.... The total value of unemployment benefits is less than 0.25 percent of G.D.P., half what it was in 2003, when the unemployment rate was roughly the same as it is now.... Strange to say, this outbreak of anti-compassionate conservatism hasn’t produced a job surge.... Why is there so much animus against the unemployed, such a strong conviction that they’re getting away with something, at a time when they’re actually being treated with unprecedented harshness?...
Every time I think that the east and west coasts are too over-bureaucratized I visit the Missouri-Mississippi-Ohio valley and find something like this--and I haven't even gone to the real south, or to Texas.
Remind me again why the Federal Reserve hasn't Incorporated every single American as a bank holding company? It makes payday loans for banks, so why doesn't it make payday loans for individuals? Remind me again please why you don't have a post office small banking and payday loan business?
David Hudnall, in Kansas City:
David Hudnall: A closer look at the Feds' crackdown on two KC-based predatory lenders: "On Wednesday, September 10...
...U.S. Marshals, local law enforcement and a temporary receiver appointed by a federal judge arrived at the headquarters of CWB Services LLC, at 6700 Squibb, in Mission.
Larry Cook, the temporary receiver, ordered all employees present to step away from their desks. Photos and video were taken of the premises. Employees submitted to in-depth interviews and filled out questionnaires about their roles in the company. All items in the office that could contain information about the business — desktop computers, laptops, filing cabinets, phones — were seized.
Live Multi Bit Rate Player (1:16 video from September 19, 2014)
...by higher wages. Via Reuters:
Fisher said on Friday he worries that further declines in unemployment nationally could lead to broader wage inflation. To head that off, and also to address what he called rising excesses in financial markets, Fisher said he prefers to raise rates by springtime, sooner than many investors currently anticipate....
I wondered if he was not misquoted or misinterpreted. But he definitely warns that wage growth is set to accelerate in his Fox News interview.... READ MOAR
Over at the
Grauniad Guardian: Why is Thomas Piketty's 700-page book a bestseller? I like Thomas Piketty’s Capital in the Twenty-First Century a lot. It follows Larry Summers’s advice – which I have always thought wise--that the further ahead in time we want to forecast, the further back in time we should look. It deals with very big and important questions. It takes a broad moral-philosophical view, rather than a narrow technical-economist view. It combines history, quantitative estimation, social science theory, and a deep concern with societal welfare in a way that is too rare these days.
One of the things that holds our society together is that our arms-length market transactions are not completely arms-length--that in nearly all (except our transactions with used-car salesmen and financial-market counterparties) have some element of reciprocal social solidarity-generating gift-exchange in them.
To try to break that is not "hospitality"--is not treating somebody like a guest. It is, rather, the reverse.
And so Kevin Drum is annoyed:
Kevin Drum: A Brief Note on Texas Hospitality "Jay Nordlinger had an unusual experience...
...with a taxi wrangler at the Dallas airport yesterday:
The man put my suitcase in a taxi’s trunk. I handed him a tip. He said, “No, no, we’re not allowed to take that.”I have been a fair number of places over the years — and I bet I could count refusals of a tip on one hand.... There is something I tell people who think they don’t like Texas: Just go there. That’ll cure you. Texas is distinctively hospitable, and the food, girls, etc., cannot be surpassed (though they can be matched).
For what it's worth, 'hospitable' is not the same thing as 'airport authorities don't allow employees to accept tips.' The former is a trait of people who are just being nice. The latter is something that CEOs force on their low-paid employees. There's a difference.
Over at Equitable Growth: Claims that most of the decline in labor-force participation since 2008:
are "structural" have always seemed to me to run aground, hole themselves, and sink on the reef that is the 25-54 labor-force participation rate. I have been reading the 25-54 labor-force participation rate since 1980:
as showing three things: READ MOAR:
From David Leonhardt's The Upshot:
Claire Cain Miller: Will You Lose Your Job to a Robot? Silicon Valley Is Split: Following are a sampling of the points of view expressed in the Pew report.
Most utopian: “How unhappy are you that your dishwasher has replaced washing dishes by hand, your washing machine has displaced washing clothes by hand or your vacuum cleaner has replaced hand cleaning? My guess is this ‘job displacement’ has been very welcome, as will the ‘job displacement’ that will occur over the next 10 years. This is a good thing. Everyone wants more jobs and less work.” — Hal Varian, chief economist at Google
Over at Equitable Growth: Apropos of: In Which I Make Myself Very Confused About Cyclical Recovery: Monday Focus for August 18, 2014, Larry Summers emails: plot male and female prime-aged employment rates separately, and be afraid:
UPDATE: As Noah Smith politely points out, I did a no-no in being so lazy as to take averages of monthly returns to be "close enough" to cumulative compounded returns. Fixing that requires some edits, which I have made:
...is hovering at a worrisome level.... Above 25, a level that has been surpassed... in only... the years clustered around 1929, 1999 and 2007. Major market drops followed those peaks.... We should recognize that we are in an unusual period, and that it’s time to ask some serious questions about it...
The first question I think we should ask is: how damaging in the long run to investor portfolios were the major market drops that followed the 1929, 1999, and 2007 CAPE peaks? The CAPE is the current price of the S&P index divided by a ten-year trailing moving average of its earnings: the CAPE looks back ten years to try to get an estimate of what normal earnings are and how stock prices deviate from them. Let's look ahead and calculate ten-year forward earnings to get a sense of what signals the CAPE sends for those of us interested in stocks for the long run.
Over at Equitable Growth: Science fiction writer Charlie Stross sends us to:
Haul Train: "The first significant change in rigid haul truck design for 60 years...
...ETF Mining Haul Trains are the answer to the demand for even larger payloads than current Ultra-Class Trucks offer. The innovative design results in the lowest cost per ton in the industry.... Unique to ETF, each truck irrespective of capacity can operate together with others of the same capacity as a ‘Haul Train’ two; three, four or more individual trucks can easily be linked together using a steel arm carrying an enclosed armoured data cable within its structure. Information data from the first operator controlled truck is transmitted via the link arm to the following trucks guiding and controlling all important operating functions like engine power, steering direction and brakes, just as if each unit had separate operators following each other.
The real operational advantage soon becomes very obvious, for every train there is just one operator, so as unit numbers increase payload capacity go ‘up’ while operator costs come ‘down’. Each haul train features ‘side dumping’ capability, each truck can dump individually or together at the same time at the dump area and crusher. If for any reason the mine plan should change requiring fewer units in the train each truck unit can be de-coupled, allowing each truck to operate independently. This unique configuration provides a mine wishing to increase operating capacity simply by increasing the number of trucks in the train. ETF Mining Haul Trains can be used on the same roads where current Large Haul Trucks are operating with existing haul road profiles and bend radius. Side-tippers are standard...
The remarkable thing about this advertisement is the stress on how the "enclosed armoured data cable" allows the mind to economize on * truck drivers*. Figuring out a way to--sometimes--remove four out of five truck drivers from the necessary resources to make the mine operate is a huge selling point. But, then, if you are paying $50,000/year for a skilled mine-truck driver, that is $500,000 over the ten-year life of a truck that costs $1,000,000 (or more). The cost of getting the human brain is not the bulk of the cost of running the truck, but it is a significant proportion, and economizing on it by replacing drivers and slaving the follower trucks to the leader is a powerful potential source of economy.
I do not know whether the lesson to draw is that human brains still add immense value--look at how much of the cost of even the most capital-intensive mining operations is skilled human labor--or that a great many things that humans do today that are well-paid are ripe for disruption as soon as our technologists can figure out how to use silicon to mimic the skills of we shoebox-sized 50-watt supercomputers well enough...